Penn Lays Off Roughly 100 Employees to Boost ESPN BET Growth
A tough start to the ESPN BET era took another negative turn last week as Penn Entertainment laid off roughly 100 people as part of a "new phase of growth," according to an internal memo seen by CNBC.
The move comes less than a year after Penn inked a $2-billion deal with Disney to create the ESPN-branded sportsbook, which ranks among our best sports betting sites. That came almost exactly two years after a separate $2-billion deal to acquire Canadian media company theScore.
“When PENN acquired theScore, we hit the ground running with the build-out of our proprietary tech stack and the migration of our sportsbook to theScore’s best-in-class platform,” Snowden wrote in the memo. “This led us to temporarily set aside any potential organizational changes that would typically follow a major acquisition.”-
Snowden said the company is focused on "product enhancements and a deeper integration into the ESPN ecosystem" as it tries to close the gap on the industry's best sports betting apps. That could include new features in addition to its ESPN BET promo code for new customers ahead of the 2024 NFL season.
Tough year continues for Penn, ESPN BET
When Penn Entertainment first launched ESPN BET last November, the company targeted a 20% market share by 2027 as it touted the value of ESPN's brand and positioned itself as one of the best sportsbooks in the industry.
That sort of growth is yet to materialize, much to the chagrin of Penn shareholders and employees alike. According to Legal Sports Report, ESPN BET ranked sixth in Q2 betting handle (3.2%) and gross revenue (2.7%), which comes after Penn missed earnings projections in each of the first two quarters since the sportsbook launched.
As a result, Penn's stock price has plummeted by roughly 30% since it struck that $2-billion deal with Disney on Aug. 8, which originally drove the company's stock price above $27. It was trading below $19 as of Tuesday afternoon, a slight recovery from a low of $18.03 last Thursday after the initial news of the layoffs.
Shareholders losing patience in Penn
The company's floundering stock price and failure to capture a larger market share from the likes of FanDuel and DraftKings has been drawing sharp criticism across the industry and from key stakeholders in the company, which once saw its stock close as high as $136.47 back in March 2021.
In May, the Donerail Group - a major Penn investor for years - released a public letter calling out Snowden and the company's high-priced acquisitions since he took over as CEO in January 2020. That includes the decision to spend over $550 million across a three-year period to buy Barstool Sportsbook, which Penn then sold for $1 last August.
The letter likened Snowden and Co. to "riverboat gamblers" content to double down on failed ventures to the detriment of shareholders, who have lost more than 80% in a three-year period.
"After four years of effort, attention, and billions of dollars of shareholder capital invested, the Company has been unable to disintermediate the online sports betting landscape, as it had forecast," the letter said. "Moreover, the growing pattern of guidance misses ... has significantly damaged the credibility of this management team and Board of Directors (the “Board”). We question whether such credibility is beyond repair."-
The letter also called for Penn to sell its brick-and-mortar assets to cover its recent losses, which totaled nearly $500 million last year alone. There is no indication that Penn is looking to sell with NFL season just six weeks away.
